Monday, April 22, 2019

It's decision day for FedEx's voluntary employee buyouts

Today, FedEx employees have learned who will leave as part of the company's voluntary buyout.

The Memphis-based shipping and logistics giant announced cost-reduction actions — which included a voluntary buyout program for eligible U.S.-based employees — during its second quarter 2019 earnings call, held in December 2018. Monday, April 22, was the date employees would reportedly find out who would be leaving the company.

The departures are expected to start in May and occur in phases. When asked about the buyouts on Monday, a spokesperson for FedEx simply told the Memphis Business Journal the company didn’t have anything additional to share. FedEx has not released any information regarding the number of employees leaving.

Trip Miller, managing partner at Memphis-based hedge fund Gullane Capital Partners LLC, which holds FedEx in its fund said he views the employee buyout as a win/win for both employees and the company.

“Employees get a very attractive buyout and, obviously, the ability to go do other things or take truly an earlier retirement,” Miller said. “And, to FedEx, as Alan Graf [CFO for FedEx] has pointed out, it is a tremendous cost savings."

In terms of downsides, Miller said there could potentially be a negative impact to employee morale, and that anytime there is a buyout a company runs the risk of losing some great talent. But, he reiterated, overall this move by FedEx is positive.

“During the third quarter of 2019, we began offering voluntary cash buyouts to eligible U.S.-based employees in certain staff functions. The U.S.-based voluntary employee buyout program includes voluntary severance payments and funding to health care reimbursement accounts, with the voluntary severance payment calculated based on four weeks of gross base salary for every year of continuous FedEx service up to a maximum payment of two years of pay.”

In previous filings with the SEC, FedEx stated the voluntary buyout program was expected to have a pre-tax cost of $450 million to $575 million. Savings from the buyouts are anticipated to be between $225 million to $275 million on an annualized basis starting in 2020 for FedEx. Executives have also mentioned that similar buyout programs could occur for FedEx employees in its international regions.

“I think you will see this offered up and rolled out in even a broader scale over the year to come,” Miller said. “There is a lot of excess capacity in the FedEx system from an employment standpoint that, again, this is a win/win for employees and for the company.”

FedEx has more than 450,000 employees who serve more than 220 countries and territories